Viewpoint: NLRB Finds Unlawful Standard Employer Protections in Severance Agreement

By Jonathan A. Segal March 2, 2023

​Overruling precedent, the National Labor Relations Board (NLRB) recently ruled in McLaren Macomb that an employer violated the National Labor Relations Act (NLRA) by including in a proposed severance agreement standard provisions prohibiting disparagement of the employer and requiring confidentiality of the terms and conditions of the severance agreement. According to the NLRB, "the employer's [mere] offer is in itself an attempt to deter employees from exercising their [NLRA] statutory rights, at a time when employees may feel they must give up their rights in order to get the benefits provided in the agreement."

While the NLRA applies to union and nonunion employees alike, employees are defined to exclude supervisors and managers. Therefore, the case, in and of itself, is not relevant to supervisory, management and executive positions. Nonetheless, employers need to keep in mind that the NLRB likely will continue to construe supervisory positions relatively narrowly, so employers must look at more than an employee's job title to determine if the case applies to a titular supervisor.

More Robust Retained Rights Clauses in Response to Decision

Notably, the severance agreements at issue in McLaren Macomb do not contain a retained rights clause carving out protected activity. That is not the case, or at least should not be, for most employers. However, the carve outs in most existing severance agreements will not be sufficient to meet the broad definition of concerted activity protected from employer interference under the analysis in the recent NLRB case.

One approach for employers seeking to revise their agreements is to eliminate such "offensive" provisions as nondisparagement and confidentiality. An alternative is to craft a more robust retained rights clause consistent with the language and rationale in the NLRB case.

However, the more robust carve out would have to be very broad—so much that it may effectively eliminate the benefits of the standard provisions it is designed to temper. Worse yet, it may provide a road map for the precise conduct employers wish to avoid.

If the employer includes a broad carve out in an effort to mitigate the risk of retaining nondisparagement and confidentiality provisions, employers should make sure their severance agreements have broad severability and narrowing clauses. One can anticipate that the case will be used to attack the validity of severance agreements before the NLRB, and severability and narrowing clauses may help mitigate the risk of such attacks.

EEOC's Focus on Nondisparagement Agreements

As noted earlier, the NLRB case is irrelevant to severance agreements offered to or entered into by supervisory- and management-level employees. However, the analysis may not be.

The Equal Employment Opportunity Commission (EEOC)'s draft strategic enforcement plan published earlier this year states the EEOC will focus on "overly broad waivers, releases, nondisclosure agreements or nondisparagement agreements." Although the emphasis of such focus by the EEOC is on preserving access to the EEOC or participating in its investigation and litigation, the EEOC could adopt an enforcement position—relative to Title VII of the Civil Rights Act of 1964—the same as or similar to the NLRB's position with regard to NLRA entitlements.

Consequently, employers may wish to review their templates for individuals not covered by the NLRA to ensure their retained rights carve out and other protective clauses are sufficiently strong to anticipate potential challenges.

While on the issue of templates, do not forget state laws. More specifically, a number of state and local laws impose restrictions on nondisparagement and confidentiality. These states include California, New York and Oregon. A template is a starting point, not a stopping point.

Finally, while the NLRB case involves severance agreements, its analysis is not so limited. For example, many company codes of conduct include nondisparagement clauses. Employers would be well advised to evaluate legal and business considerations relative to if and how to include nondisparagement clauses in their codes.

Jonathan A. Segal is a partner at Duane Morris in Philadelphia and a SHRM columnist. Follow him on Twitter @Jonathan_HR_Law.



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